Is Buying A Home With A Friend A Good Thing To Do?
A family-only project no longer
Buying a home is a big decision and usually involves a couple or family. This is because the family life cycle usually triggers housing investments: from an apartment for a young couple to a large house with a backyard for a growing family to a condo in a sunny destination for retirement. Family is the biggest motivator for home buying.
So, it might be a surprise that many Americans are buying houses by joining forces with people they are not married or related to. A survey conducted last year revealed that 4% of home-buying Americans brought their property together with roommates, 4% with friends, and 5% with relatives of a younger age.
A growing trend
This trend has been quietly gathering strength during the last few years, as both mortgage rates and house prices have risen tremendously. Adults know that if they wait for marriage or their perfect partner to come into their lives, it might be too late to get into the real estate market. Many young professionals, especially in the Bay Area, are prioritizing their careers. Marriage and kids are far-fetched.
So, if you have a roommate or friend you trust and are considering buying a home together, the first thing to know is that you will be hardly alone and that the real estate industry is ready to facilitate your search and purchase.
Read before you buy a house with a friend
However, there are crucial elements that you need to consider before even looking for home options in your local market.
- Agree with your friend (or relative) about the kind of home you want to purchase. The agreement should cover the neighborhoods both partners will target, the approximate square footage, the amenities, the number of rooms and bathrooms, and everything as detailed as possible.
- Agree with your partner on how to share the home. If you agree to continue on a roommate situation, let your partner know about the expectations. When renovations or construction are necessary for the more private use of spaces, agree with your partner, who will eventually pay for those projects.
- Be prepared to disclose a lot about your finances. Banks and lenders want to know your income, debts, credit score, and those of the friend or relative buying a house with you.
- Talk about how the property will be titled. Titles guarantee partners’ rights over the property, even in the event of death. Tenancy in common (TIC) is the most common option for properties that more than one person owns. The other option available in California is Joint Tenancy.
- Be realistic about the amount and sharing of tax and maintenance. Start budgeting for maintenance, repairs, bills, and taxes as soon as you have bought a house. Then, start budgeting for maintenance, repairs, bills, and taxes. The agreement may be similar to the one you had about sharing the space or very different, but you must have it!
We can help you and your friends
At The Cal Agents, we know that buying a house today might involve joining the finances of two, three, or more persons who share the common goal of owning a home and building equity over the years.
Want to learn the basics of home ownership? We have a real estate education program, Real Estate 101, to help you and your partners understand the realities of real estate. Sign up for these FREE classes by clicking here.
Join The Discussion